Barriers and Solutions to Growing the Grid, with Paul Joskow

Notable Quotes

• Building up transmission capacity: “Many of the most attractive wind and solar sites are located in parts of North America that are farther from demand areas, farther from the bulk of the existing fossil-generating capacity, and far from the existing transmission network. To access and integrate the best wind and solar resource areas, we need more transmission capacity to develop the connections and get the supplies to where the demand is.” (4:26)
• The lack of a national decarbonization policy creates planning issues: “I think the first barrier is simply the fact that the United States does not yet have a national decarbonization policy, and this creates all kinds of problems with transmission planning, project selection, and cost allocation—especially in areas where the system operators cover multiple states with very different decarbonization policies. The result is that transmission planning often devolves into arguments about who’s going to pay. The states that have adopted deep decarbonization targets want to pay for more transmission to get these resources, while the states that haven’t—or that may be protecting their coal industries—don’t.” (10:06)
• Avoiding backlash with transmission projects: “It’s important to engage all the stakeholders early in a project, so they can have input into where it’s going to be located and how it’s going to be designed. There’s a lot of evidence that early engagement and complete engagement with stakeholders can help to support a project that can get through all of the regulatory hurdles.” (18:32)

Top of the Stack

• “Facilitating Transmission Expansion to Support Efficient Decarbonization of the Electricity Sector” by Paul L. Joskow
• Churchill: Walking with Destiny by Andrew Roberts
• Franklin and Winston: An Intimate Portrait of an Epic Friendship by Jon Meacham
• Books by John le Carré
• Networks of Power: Electrification in Western Society, 1880–1930 by Thomas Parker Hughes
• A French Village television series
• Come From Away play
• The Polio Crusade documentary

The Full Transcript

Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today, we talk with Paul Joskow, Elizabeth and James Killian Professor of Economics at the Massachusetts Institute of Technology (MIT) and a member of RFF's President's Council. Paul has had a long and distinguished career spanning a wide range of energy and environmental topics.

Today we're going to talk about a new paper he's written examining the challenges associated with expanding the electricity grid. Growing the grid will be a critical component for achieving our long-term decarbonization goals, but it comes with lots of hurdles. I'll ask Paul to help us understand those hurdles and what solutions might help knock them down. Stay with us.

All right, Paul Joskow from MIT, thank you so much for coming on to Resources Radio.

Paul Joskow: Well, Daniel, thank you for inviting me. It's very kind, and I welcome this opportunity to share some of my thoughts on the issues we're going to discuss.

Daniel Raimi: We are going to focus today on the electricity grid, but before we get into the details, we always ask our guests how they got interested in working on environmental or energy issues in the first place, whether as a kid or later in life. What steered you into this line of work?

Paul Joskow: Well, I had no particular interest in environmental issues when I was a graduate student, but I became very interested in government regulation and regulatory reform. I decided to work in the electric power industry largely because there were lots of utilities at the time. There were lots of state regulators, 49 to be exact, and lots of data.

When I came to MIT, the MIT Energy Laboratory had just started. I began to work with people there who were interested in estimating electricity demand, looking at electricity supply, different generating technologies, and so on. Once I got into that, it became obvious that you couldn't constructively examine many of the issues and forces that were affecting the electric power sector without getting involved and interested in the environmental impacts of electricity supply and electricity consumption. I'd been working on a project on nuclear safety and siting when the Three Mile Island accident took place, and that reinforced my interest in those aspects of environmental issues. After the Clean Air Act amendments of 1990 were passed, the Environmental Protection Agency asked me to be a public member of the Acid Rain Advisory Committee. That's really when I became very interested in mechanisms for controlling pollution, especially air pollution.

Daniel Raimi: That's really interesting. As many of our listeners will know, one of the most important things that we could do to control air pollution and climate change in the power sector over the next couple of decades is to dramatically increase the amount of long-distance electricity transmission capacity that we have in this country. That's what we're going to talk about today. Can you give us a high-level overview of why we need to expand the grid to meet some of these environmental goals and give us a sense of the scale that is likely to be needed to actually achieve some of those goals in the long term?

Paul Joskow: Sure. There really are two primary reasons why the expansion of the transmission network is necessary to support efficient, deep decarbonization of the electric power sector in the United States, but it's also true in Europe, China, and other places.

The first reason is, as we look out to 2050, let's say, to a net-zero electric power sector, it's going to be composed heavily of wind and solar generation. Since they're zero carbon, they become quite cheap and the configuration, whether it's 70 or 80 percent, it's going to be very high. Many of the most attractive wind and solar sites are located in parts of North America that are further from demand areas, further from the bulk of the existing fossil-generating capacity, and far from the existing transmission network compared to today's geographic configuration.

To access and integrate the best wind and solar resource areas, we need more transmission capacity to develop the connections to get the supplies to where the demand is. Just some examples—I'll look at the Northeast because I'm sitting here in Boston—the best wind sites are offshore and in some areas of upstate New York, Maine, and a few other areas that are pretty remote from the major demand centers. There's also abundant hydroelectric capacity in Quebec, but to get access to these resources, we need to build new transmission infrastructures offshore and to gain access to the areas in upstate New York and northern New England. There's tremendous congestion on the transmission network between the North and the South. If we want to get more access to the wind and hydro resources in those areas, we have to expand the transmission network to remove the congestion and to make it feasible to push more power down from those resources. I want to emphasize the word efficient. If we're going to make this transition, we want to try to do it as economically as we can, and those resources are just located in other areas.

Another area is the Midwest. There's a large swath of area through the Great Plains from Canada to Western Texas that has tremendous wind resources, but historically, there has not been a whole lot of demand in those areas. There isn't much of a transmission network, and if we want to really move that zero-carbon energy to load centers east of there—even in Texas to eastern Texas where most of the demand is—we need new transmission infrastructure to make that possible.

The second primary reason really is a consequence of the attributes of wind and solar generation. These are intermittent generating technologies. What does that mean exactly? Well, with the current configuration of fossil generators and nuclear power generators, the production is controlled by the system operator based on the economics of dispatching, more or less, electricity from different generating plants. The system operator controls the system, moves up and down an economic dispatch curve, and tells which generators to produce and which generators to stop producing as the system operator tries to balance supply and demand continuously.

But wind and solar generation are different. The amount of generation for those resources is driven by highly variable and exogenous wind speeds and directions, variations in solar radiation, and other weather conditions. The system operator can't control those—the system operator needs to respond to those. And the wind and solar radiation vary from place to place as well. As a result, wind and solar resources can be utilized most efficiently by expanding and integrating existing wholesale market areas to take advantage of the geographic diversity in the variations of the wind and solar resource drivers so that we can aggregate over wider areas. If the wind is high in one area of the Midwest and low in another area, the ups and downs can be accounted for by integrating the resources together.

There have been a number of studies that have shown that expanding supply diversity reduces costs as well. I think this is an important piece of the puzzle here. People talk about expanding transmission, but many of the models that have looked at the costs and benefits of expanding transmission implicitly assume that what goes along with it is the further integration of wholesale markets for electricity over wider geographic areas. In Europe, they call it “market coupling,” I guess here we would call it more wholesale market integration. Those are the two primary reasons.

Daniel Raimi: Okay. That makes a lot of sense. You explored this issue in really great detail in a recent paper, which we'll have a link to in the show notes. The paper is called “Facilitating Transmission Expansion to Support Efficient Decarbonization of the Electricity Sector.”

Along with the points you just made, early in the paper you lay out some of the challenges to making this expansion happen in the real world. Many of us are familiar with the concept of not in my backyard, or “NIMBY,” which is one barrier, but you argue that there are plenty of other barriers that go well beyond NIMBY. Can you give us some thumbnail sketches of what those other barriers are?

Paul Joskow: Sure. I'll come back to NIMBY, but let me do that last. Let me just point to some of the other barriers.

I think the first barrier is simply the fact that the United States does not yet have a national decarbonization policy, and this creates all kinds of problems with transmission planning, project selection, and cost allocation, especially in areas where the system operators cover multiple states with very different decarbonization policies. The result of that is transmission planning often devolves into arguments about who's going to pay. The states that have adopted deep decarbonization targets want to pay for more transmission to get at these resources, while the states that haven't or may be protecting their coal industries, don't. I think it's just an enormous challenge to do this right if we don't have a national decarbonization policy.

Second, there's an institutional mismatch between the geographic expanse over which transmission planning and cost allocation take place and the locations of the best solar and wind sites. The Federal Energy Regulatory Commission, which I'll refer to as FERC, tried to improve the situation when it issued Order 1000 in 2011 requiring system operators to look more aggressively at opportunities to expand into regional transmission. If you look at the planning areas that are defined, they reflect a hundred years of the history of the electric power industry. They don't match well with where the most attractive wind and solar resources are located. As a result, Order 1000 has not been very successful in expanding interregional transmission capacity to better access wind and solar resources.

I argue in the paper—and I'm sure that this is going to be quite controversial—that we really need an umbrella transmission planning organization that covers the whole United States and Canada because our electric power systems are largely synchronized between the two countries. I give the European example that has created an umbrella transmission planning organization called the European Network of Transmission System Operators for Electricity (ENTSO)— ENTSO-E for electricity—and it identifies promising interregional transmission expansion options and supporting upgrades to the existing network to integrate the generating resources that the projects make available. In the United States, we have the North American Electric Reliability Corporation, or better known as NERC, which creates and enforces reliability rules for operating the networks in North America, but it doesn't have any planning responsibility. What I'm suggesting is that we create an umbrella planning organization that doesn't replace the existing independent system operators or the existing 15 transmission planning areas defined by FERC but provides an umbrella that integrates the system, develops scenarios looking out to 2035 or 2050, and identifies promising transmission projects that could be developed by private developers, by transmission utilities, cooperative arrangements between the current planning areas. I'd really like to see the United States have an organization similar to ENTSO-E in Europe that covers the US and Canadian perspectives that can play an integrating role with a broad overview of where the resources are and where the demand is to identify potential transmission options that take account of decarbonization goals as well as other goals, reliability goals, other economic goals, and so on.

Paul Joskow: I think the third problem is that—especially the independent system operators, of which there are several in the Northeast, Texas, California, and the Midwest—the independent system operators have not taken decarbonization as an objective in their planning processes. If you look over time—and I've been involved in this business for a long time—the transmission planning criteria that FERC has specified have evolved over time.

First, they said, "Well, you should only look at reliability considerations and leave all other transmission investments to the market." Well, the market didn't produce anything. Then, the goals were expanded to include so-called market efficiency criteria, which are basically opportunities to not just improve reliability, but reduce congestion inside the International Organization for Standardization (ISOs). Then, they were expanded to include undefined public policy projects, largely to placate states that have adopted deep decarbonization goals.

In my view, transmission planning should include the benefits and costs of decarbonization commitments in evaluating alternative transmission projects. In doing so, we should try to identify the best configuration that takes account of all of the costs and benefits of a transmission network, and then argue about who's going to pay for the upgrades that are there to fulfill decarbonization commitments so that the states that have them will be allocated those costs, and those that have not adopted them will not, but we would separate those. Right now, the cost allocation has become a real problem because it's those jurisdictions and states that don't want to pay for transmission projects to access wind and solar sites that have become an impediment to efficient transmission planning.

Daniel Raimi: Right. One quick clarification question. “Cost allocation”—for those listeners who might not know what that term refers to—is that essentially what portion of the project ends up on different consumer bills at the end of the day, or does it mean something else?

Paul Joskow: Well, ultimately, everything ends up on the consumer's bill. Just to give you an example, in New England, there's a project in development that is going to increase the transmission capabilities to bring more hydroelectric energy from Canada into New England. However, it's a project that is responding to a Massachusetts public policy initiative. The question is, “Who's going to pay for it?” Well, Massachusetts is going to pay for it, but in the end, it's going to benefit all the states in New England that have adopted similar programs. There's one state in New England that isn't simpatico to the rest of the region's decarbonization initiatives, and that's New Hampshire. They don't want to pay for any of this. As a result, projects can easily get wrapped up in how these costs are allocated to transmission and distribution companies and then ultimately to consumers.

Daniel Raimi: Got it. Great. Were there any other barriers that you wanted to mention before we go on to the next phase?

Paul Joskow: Yes. We'll turn to NIMBY. In that paper, I kept that for last because I think too many people just say, "Oh, NIMBY, you can't site transmission lines so let's forget about it." I think that's not a constructive way of approaching the not in my backyard problem. In the paper, I suggest several strategies to reduce opposition to new transmission projects.

First, it's important to engage all the stakeholders early in a project so that they can have input into where it's going to be located and how it's going to be designed. There is a lot of evidence that early engagement and complete engagement with stakeholders can help to support a project that can get through all of the regulatory hurdles that are there.

I also suggest that new transmission projects seek to use existing rights of way, upgrades of existing transmission facilities to higher voltages and capacity, smart grid technologies—basically, to squeeze more out of the existing infrastructure so that any perceived adverse impacts are not increased significantly. And then, for projects requiring new rights of way, there are opportunities to utilize old, abandoned railway lines, abandoned canal roots, other underutilized rights of way undersea and undergrounding, where feasible, to reduce the adverse impacts. While this may sometimes increase costs, it also can reduce the opposition because the impacts are basically reduced because the lines are underground, underwater, or on a right of way where people are used to noisy trains passing already, and this will not be a big incremental impact. A number of the projects that are moving forward successfully have taken this route.

Finally, I think we have to recognize that if there are going to be losers, they're going to want to be compensated in some way. I think we have to be prepared to make side payments of various kinds to locations in particular where they don't see any particular benefit from the line, but they see potential adverse effects on environmental quality, on recreational values, and so on. I think we have to be prepared to compensate them in some way. There are stories about a project that was completed in 1990—one of the first major projects connecting Hydro-Québec with New England that went from Quebec through Vermont, through New Hampshire, down into Massachusetts—the folk wisdom is that if you go through the towns it passes nearby, every one of them has a new fire station, a new police station, or a new school that dates back to that period of time in an effort to spread some of the benefits and reduce opposition. I think the NIMBY problem is challenging, but it's not insurmountable if these factors are taken into consideration in designing a development and planning process.

Daniel Raimi: Great. That makes sense. You've told us, or you've mentioned, one project already coming down from Quebec into Massachusetts. Do you want to elaborate on that example a little bit more, or maybe pick another example for a project here in the United States that's faced a lot of these hurdles and how it's maybe tried to address them?

Paul Joskow: Yeah. Let me just elaborate a little bit on what was called the Hydro-Québec Phase II project that was energized in 1990 and was completed fairly quickly. I think there are a number of attributes of that project that provide some lessons learned.

First, it was an all-New-England project. It was supported by all the utilities in all six states. The costs were allocated across the states. The energy was allocated more or less based on the demand in those states. As a result, that substantially reduced what may have been opposition because there were benefits as well as costs that were widely distributed in the region. I already discussed the efforts to work early and hard with the communities where the transmission line passed, and also it made use of existing rights of way wherever it could to minimize the impacts. That project went very, very smoothly.

There have been similar projects much more recently that are basically trying to do the same thing, to bring more hydroelectric generation into New England, but they've been proposed and developed by individual states in response to procurements. There was a project called Northern Pass that was going to connect Hydro-Québec through New Hampshire through some pristine areas but to supply just Massachusetts. It ultimately just couldn't get approved. Then there was a replacement project called Clean Energy Connect that then goes through Maine. Well, the way it was pitched was this is a Massachusetts project, and this is where all the clean energy's going, so the people in Maine opposed it. They made some concessions to allocate some benefits to Maine and to identify more of the benefits to Maine and other states of having these increased resources. The project's now being constructed, but there are still people in Maine trying to block it. In my view, these projects really did not take into account properly the need to have a cooperative development project that spreads the benefits and costs widely.

Daniel Raimi: Great. That makes a lot of sense. Paul, one more question before we go to our Top of the Stack segment, which goes back to the policy issue that you touched on earlier when you were talking about FERC and making a proposal about umbrella authority for helping to plan with siting. Can you elaborate on that policy idea a little bit more? Or maybe talk about some other policies that could be implemented at the federal level to help alleviate some of these problems? Also, if you want to wade into these waters, you could let us know how politically viable you think some of the solutions might be in the years ahead.

Paul Joskow: Sure. Well, the primary regulatory agency at the federal level is FERC. FERC has played a very constructive role in industry restructuring and in the development of competitive wholesale markets, but no one would call FERC speedy. Its effectiveness also obviously suffers from the continued arguments about the decarbonization policy.

I think FERC can be much more effective once we have a national decarbonization goal, but in the interim, there are things that FERC can do to facilitate investments and needed transmission to support decarbonization. It can revise its planning procedures so that all benefits and costs are taken into account. It could more aggressively enforce the interregional planning rules that were established now almost 10 years ago in Order 1000. it could simplify the cost allocation rules, which can be very, very complicated. It can promote competitive procurement, which is provided for in Order 1000. I think it just needs to be more aggressive. FERC is a regulatory agency that relies on lengthy rulemaking proceedings, limited technical input of its own, and in my view, is too dominated by lawyers and complex administrative procedures.

You can see that they have a rulemaking that's going on right now on the issues we're discussing here. It's going to take forever. Rather than presenting, "Here's how we think we can solve the problems. Tell us what you think,” they ask a long series of vague questions. People come in and they file comments. Then there are reply comments. Then there's a proposed rule. Then there are more comments. Then there are reply comments. Then maybe there's a final rule. Then it goes to court. It could take five years. I think we need to look at just changing the structure of that agency, maybe becoming a single administrator agency like the Environmental Protection Agency.

There are models to look at. If we look at England, the regulator there, the Office of Gas and Electricity Markets (Ofgem) is extremely competent and has excellent technical staff. The California Public Utilities Commission does as well, and so does the New York Public Service Commission. The staff has many more informal technical conferences and proceedings, and a lot more technical input than FERC does. I think we just need a new regulatory agency for the electric power sector if we're going to make this work. That's not to say anything bad about the people who are there, they work hard, but this is an agency that goes back to 1935, and its primary job for many years was licensing new hydroelectric facilities or re-licensing old hydroelectric facilities and doing a little bit of regulation of the price that investor-owned utilities charge to municipal utilities. It really wasn't until the 1980s and 1990s that it became more active in promoting policy changes. They've never gone back and looked at the structure of the agency to see if both its procedures and its human capital are well aligned with the goals we have for transforming the electric power industry. That's a discussion that obviously is politically fraught, but I think it's a discussion that we should begin to have.

Daniel Raimi: That's really interesting. Just one kind of technical question on that idea. Would such restructuring require legislation? Would it require Congress to act? Or is it something that the executive could do on its own, and maybe there are different gradations of actions that could be taken at different scales?

Paul Joskow: I think to fully implement what I have in mind, it would take congressional action. However, the administration, the executive, can expand the role of the Department of Energy in transmission planning and indicative planning. Identification of transmission opportunities to support the decarbonization goals. They already have some authority in that area, but it hasn't been used much. I think the administration can be more aggressive in using the Department of Energy’s existing authority and expanding its staff to basically begin to do some of the things I have in mind for a new umbrella transmission planning agency.

Daniel Raimi: That's really interesting. Great. Well, certainly as we often do on the show, we're just scratching the surface of an incredibly complex and interesting topic, but I hope people have gotten a flavor for it and will go and check out the paper, which again, we'll have a link to in the show notes.

Let's go to our last question, the Top of the Stack. What's on the top of your literal or metaphorical reading stack that you would recommend to our listeners, Paul?

Paul Joskow: I don't read energy and environment books for fun. I work so many hours that I try to draw a line between my professional activities and the rest of my life, so I like biography and history. What I'm reading most recently, what I've been working through, are biographies of Winston Churchill. Andrew Roberts has an excellent biography, and so does Jon Meacham. I also like mysteries with interesting people, so I'm a great fan of John le Carré, and I've reread some of his novels during the pandemic.

One book that I would recommend, which I reread in writing that paper, is a book called Networks of Power by Thomas Hughes, which looks at the early history of the development of the electric power sectors in the United States, England, and Germany. It's really fascinating. You really learn a lot about transmission in this book because many of the innovations and transmission were basically efforts to access remote hydroelectric facilities that were remote from where demand was and many of the early innovations were efforts to do that. So there's some similarity to where we are today.

For those who are still stuck at home, I haven't gone to a movie theater in a year and a half, maybe more, but I've been watching some interesting videos. There's a TV series called A French Village that is really excellent. There's a film version of a play called Come from Away, which is about 9/11 and the planes that had to land in Newfoundland and how nice the people were. It's an uplifting Broadway play, but you can watch it on TV because it's been filmed.

Finally, for those people scratching their heads about what's going on with the vaccine, I recommend an American Experience program called The Polio Crusade which is about the development testing and distribution of the Salk polio vaccine in the early 1950s. I like that very much because when I was in second grade, I was in the experiment.

Daniel Raimi: Oh, wow.

Paul Joskow: I still remember lining up in the gym, getting my shot, and then a year later getting a letter in the mail telling me whether I got the placebo or the vaccine. I really think it's a great program.

Daniel Raimi: That's fascinating. Which one did you get in the end?

Paul Joskow: I got the Salk vaccine in the end.

Daniel Raimi: That's really cool. Great. Well, Paul Joskow from MIT, this has been really fascinating. Thank you so much again for coming on Resources Radio and telling us about this really fascinating topic and the fascinating work that you're doing on it. We really appreciate it.

Paul Joskow: Well, thank you for inviting me. I enjoyed it and good luck.

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RFF is an independent nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. The views expressed on this podcast are solely those of the podcast guests and may differ from those of RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals. Resources Radio is produced by Elizabeth Wason with music by me, Daniel Raimi. Join us next week for another episode.